But looking ahead, forex traders must navigate many unknowns, from the second wave of coronavirus, insights into how the US economy is recovering from the coronavirus pandemic, optimism over COVID-19 vaccine trials, ongoing US-China trade talks to US Presidential elections.
The infusion of both fiscal and monetary stimulus from major countries and trials over coronavirus vaccine have been surging the risk appetite, activating the USD/INR bears. If the crucial support of 74.50 breaks on heavy corporate inflows, then we may see a fall towards 74.20. But it is very premature to say that the USD/INR bearishness will continue as the global economic outlook is grim and shows no signs of recovery any time soon. Also, the RBI has been intervening in the USDINR spot and sucking out all the volatility.
The forex market is grappled with a lot of uncertainty. The recent much-awaited US-China trade talks got postponed with no new agreed date. The postponement of the deal doesn’t show signs that the deal is in jeopardy but Trump has been blaming China to hit the US with coronavirus plague. The 2020 US election will likely be controversial—in more ways than one. Trump is using China as a trump-card to triumph against Democratic Biden. So there is enormous uncertainty and it will get harder as we near the Nov 3, election phase, and can activate dollar bulls.
Technically as seen in the weekly chart, USDINR Spot has been trading in a tight range of 74.50-75.50 since mid-June and is currently hovering at 74.84. It is in the process of forming a flag pattern whose breakout point is located at 75.70. Once it comes out of its consolidation range and breaches 75.70 then 76.0/76.35 and it’s previous high 76.90 is expected. However, 76.90/77.0 is a strong resistance zone, but if the pair sustains above 77.0 mark the 77.50 which is the target for flag pattern is expected. Bollinger band gap has also narrowed thus giving an indication of an upcoming big move in the coming days.
On the downside, 74.50 is consistently guarded by the RBI intervention shield below which 74.25 is also key bottom-to-bottom trend line as well as Bollinger band’s lower support level. However, if USDINR spot falls and constantly trades below 74.20 then 73.65-73.0/72.90 (crucial 61.8% Fibonacci Retracement as well as 50-days moving average support zone) is expected.